Smart gas metering Europe – an untapped opportunity?

When smart metering is discussed, it is often with reference to electricity metering, with smart gas meter deployments continuing to lag behind those of smart electricity meters. However, natural gas is delivered directly for heating and cooking purposes to around 120 million residential and C&I customers across Europe (Eurogas 2012), and the potential market for smart gas metering should not be ignored.

At a European level, EU-wide directives and national regulations continue to be the predominant driving force behind smart metering. In particular, the Third Energy Package, and the 2009 Electricity and Gas Directives, which are aimed at liberalizing the electricity and gas markets to enable consumer participation and improve transparency, require suppliers to improve the frequency and accuracy of meter reading and billing and provide consumers with better access to consumption information. Similarly to the case for electricity, the 2009 Gas Directive also required member states to carry out a cost-benefit analysis (CBA) for smart gas meters by September 2012. However, in contrast to the Electricity Directive, which requires that 80% of consumers should have smart electricity meters by 2020, the Gas Directive does not specify how many consumers should have smart meters or provide a deadline for deployments following a positive CBA. This lack of enforceable EU regulations has contributed to the slower approach in gas, and several EU member states have yet to submit their CBAs for gas.

A number of factors affect both the business case and possible social benefits of smart gas metering including density of gas customers, gas customer expenditure relative to electricity expenditure, competitiveness of supply market and need for consumer engagement, meter location, and meter ownership. There is considerable variability in the gas market characteristics and drivers for smart gas metering at a national level and the pros and cons of smart gas metering vary widely. Overall the business case for gas smart metering is harder to make than for smart electricity metering, with limited potential for demand side management (e.g. consumers are unlikely to shift their usage of heating to off-peak times in response to changes in tariffs). Nevertheless, business benefits of gas smart metering can be derived from reducing operating costs through savings in manual meter readings, theft protection, process improvement, better scheduling and balancing processes, and consumer engagement opportunities. Additional nonmonetary benefits, which should be taken into consideration for CBAs, include greater transparency for customers and, critically, the potential to reduce carbon emissions by influencing consumers to improve energy efficiency. Countries with a high density of gas customers and where gas bills are a significant share of energy bills are likely to offer best business cases. Consequently, each country is adopting a different approach to fulfill EU requirements, and this is likely to continue.

For example, Italy (which has around 22 million gas customers) has committed to extending its smart meter rollout from electricity meters to gas meters, while Sweden (which makes wide use of district heating and has less than 40,000 gas customers) is not planning to deploy smart gas meters. In the UK — the largest gas market with over 23 million customers — there is a prevalence of multi-commodity (electricity and gas) suppliers, and gas consumption can typically account for over 50% of household energy costs. The UK government has mandated gas smart metering to be rolled out alongside electricity smart metering. On the other hand, Spain — which has over 7 million gas customers — has committed to electricity smart metering, but has gone against doing the same for gas metering for now.

In Central and Eastern Europe, energy is still predominantly supplied by large vertically integrated companies separately offering gas or electricity, district heating is commonly used, and discussions around gas smart metering have been relatively limited. However, as further moves are made to open up the energy markets (e.g. in Poland) and suppliers move to become dual-fuel suppliers, gas smart metering and related smart services might offer a way of attracting new customers and help push it up the agenda.

CURRENT STATUS OF GAS CBAs AND ROLLOUTS Despite the requirement for member states to undertake a national CBA by September 3, 2012, several EU states have still not submitted theirs. In 2012, the European Commission announced that it aims to draw a benchmark report on the costs and benefits of smart meters by mid-2013. EU countries will be expected to report to the commission on whether they think smart meters should be deployed in their country by that date.

There is still some confusion surrounding the CBA process, with a lack of clarity about what constitutes a formal CBA and which countries have already completed such a CBA. As of December 2012, countries that have conducted CBAs on gas smart metering include Austria, France, Hungary, Italy, the Netherlands, Spain, Ireland, UK, Belgium, Portugal, Romania, Greece, Denmark, Finland, the Czech Republic and Slovakia. Germany remains the largest gas country in the EU that has yet to submit its CBA and has not made a decision on whether to mandate smart meter rollout. Countries with a positive CBA include the Netherlands, UK, Ireland and France, the first three of which have already defined a timetable for the implementation of smart gas meters.

Thus, as of 2013, smart gas meter rollouts are mandated in the UK, Ireland, the Netherlands and Italy. If these go ahead as planned, this will involve deployment of over 50 million smart gas meters by 2020. In France, the final decision to go ahead with a smart gas meter rollout is due in 2013. This will involve deployment of an additional 11 million gas meters if it goes ahead.

SMART GAS METER FUNCTIONALITY Gas meter reading across Europe is usually manual and carried out infrequently, from as seldom as once every two years (e.g. in Belgium) to once every two months in Spain. Some gas meters are equipped with a low frequency pulse output to enable remote reading. In the UK, prepayment meters are also commonly used by those on low incomes.

Smart gas metering with bidirectional communication offers the potential to enhance functionality in a number of possible ways, beyond remote meter reading, which can also be achieved with one-way communication from the meter. For example, smart gas meters can enable remote switching between credit and prepaid modes, allow connection to other home devices, including in-home display (IHD) via the home area network (HAN), enable provision of real time metering, consumption and billing data direct to consumer via HAN and remote upgrade of firmware. In countries already considering smart gas meter rollouts, discussions are ongoing regarding meter specifications and differences in national requirements for meter specifications will likely remain when all is said and done.

COMMUNICATION APPROACHES Two alternative approaches to gas smart metering communications are being considered in Europe, either using a completely independent communications infrastructure for gas meters (monocommodity) or leveraging a common communications infrastructure for both electricity and gas smart metering and potentially integrating water metering in the future (multicommodity). At present, the multi-commodity approach looks to be favored.

A major distinction between the gas and electricity distribution networks is that the electricity distribution grid can be leveraged as a means of providing wired communications for the last mile to/from the meter. Across Europe, powerline carrier (PLC) communication currently dominates for the last mile in electricity smart metering. In contrast, for smart gas meters, wireless communications from the meter are being more widely considered, though wired M-Bus solutions have also been used (e.g. in the Netherlands). Existing gas meters that have a pulse output can be retrofitted with an RF communications module or can be entirely replaced by new smart gas meters with communications module plus other new smart functionalities.

The following wireless communications systems are under consideration to provide communication from the meter:

Wireless M-Bus

ZigBee.

Different frequencies have been trialed including 169 MHz, 433 MHz, 868 MHz, and 2.4 GHz (ZigBee).

CHALLENGES A number of barriers need to be overcome if levels of smart gas meter penetration are to reach levels set by the EU for electricity smart meters of 80% of customers by 2020. Full-scale smart meter rollouts involve high capital investment costs typically requiring the replacement of millions of meters and installation of relevant communications infrastructure. For example, the UK has estimated that replacing around 53 million electricity and gas meters during the rollout will involve a financial investment of over €13 billion. On the other hand, some of the potential benefits, such as energy savings and benefits for customers in managing their energy usage are difficult to quantify, while expected benefits from implementing smart meters in gas are lower than for electricity due to fewer potential gas applications (heating and cooking) and less need or capability for demand side management. Various factors are holding back the potential for cost reductions from economies of scale, and have led to issues with the availability of certified smart gas metering technology. These include differences in national requirements for meter specifications, infrastructure readiness, regulatory uncertainty, and a lack of common standards and interoperability, which are critical to bring down costs and enable utilities to avoid vendor lock-in.

With smart gas metering secondary to smart electricity metering in a number of European markets, the progress of smart electricity metering will also impact adoption of gas smart meters. The pace of developments in smart electricity metering in Europe has also been slower than anticipated, with delays in national regulations and rollouts commonplace. Despite ongoing discussions and mandates for smart meter rollouts across Europe, the majority of European countries have yet to start implementing wide-scale rollout of residential smart meters. Italy and Sweden are notable exceptions, where rollouts of smart electricity meters have been completed.

SUMMARY A huge amount of attention has been given to the topic of smart metering in recent years, but the case for smart gas meters for residential and small C&I consumers has still to be made more strongly before there is broader adoption across Europe. Given the more challenging business case and the wide diversity in gas markets across Europe, it is unlikely that smart gas meters will be mandated Europe-wide with the same deployment level requirements as electricity meters any time soon. On the other hand, smart gas meters should gain momentum if mass rollouts go ahead as expected in the UK, Italy and France, providing the incentive for utilities, vendors, and other stakeholders to address the challenges. In the long run, as consumers become adjusted to electricity smart meters, consumer expectations of gas suppliers for greater transparency and accurate billing are likely to increase, providing an additional driver. Whether regulators and gas suppliers opt for two-way smart metering, they will continue to depend on regulations and the market situation at a national level.